5 Up-and-Coming Retailers to Watch This Year

Social media has changed the way retailers work, but brick-and-mortar stores remain vital.

MINAYNVILLE ORIGINAL Once upon a time, retailers began expanding to the Internet to broaden their reach and remain competitive. These days, the trend is in the opposite direction, with many online retailers making the jump into physical stores. In our list of up-and-coming shops, however, the dominant unifying theme is the increased use of social media; each of these increasingly successful companies uses interfaces and marketing that capitalize on the success of social networks like Facebook (NASDAQ:FB), Twitter, Pinterest, and Reddit.

Polyvore. Though technically a technology company, Polyvore is an online shopping magazine of sorts that offers a unique type of user control: At the site, fashion mavens create their own personal shopping magazine where they--not fashion editors--decide "what's hot." Lauded by Time, Fortune, and Entrepreneur magazines for innovation, Polyvore (currently led by former Google (NASDAQ:GOOG) employee, CEO Jess Lee) has accomplished what many tech innovators struggle to do: Reach profitability. Every item (45 million product images) on the Polyvore platform is shoppable. With more than 19 million unique visitors per month, the platform is an attractive venue for retailers like French Connection (LON:FCCN), Bergdorf Goodman, JCrew, and COVERGIRL (NYSE:PG) to have a presence that supports customer engagement across their other multimedia marketing efforts. The company reached profitability in 2011, and reports that revenues are nearly tripling year over year. Additionally, it has raised funding from power players like Benchmark Capital (NYSE:MHP), Matrix Partners, and Goldman Sachs (NYSE:GS). Polyvore provides marketing intelligence to select retailers and fashion industry movers and shakers-providing a unique form of insight into what the Polyvore user wants-so the retailer can respond appropriately to the need. Polyvore has future plans to expand into wedding and interior design channels.

Nasty Gal. What began five years ago as an eBay (NASDAQ:EBAY) business founded by Sophia Amoruso has evolved into a powerhouse all its own. Offering a carefully curated combination of unique new and vintage items, Nasty Gal recently redesigned its site and revealed a new in-house label. The site's popularity has been fueled by unpaid forms of advertising, thanks to buzz on social media platforms like Tumblr, Instagram, Facebook, and Twitter. According to PrivCo data, Nasty Gal has increased sales from $6.5 million in 2010 to forecasts of more than $128 million by the end of 2012 . It has raised $49 million in funding from investors like Index Ventures in just five months, and boasts 60% profit margins.

Uniqlo. The first Uniqlo retail location (then called "Unique Clothing Warehouse") opened in Hiroshima, Japan, in 2004, but unless you live in New York City, New Jersey, or San Francisco (where Uniqlo has a domestic brick-and-mortar presence), you may be unfamiliar with this brand. Assuming the company's aggressive goal to have 200 stores located in the United States by 2020 comes to fruition, however, you'll know it soon enough. Owned by the Japanese company Fast Retailing (TYO:9983) (which has also recently acquired a majority stake in high-end denim retailer J Brand), Uniqlo specializes in affordable cashmere and "heat technology" shirts and jackets. The company touts its dedication to social responsibility, modern technology, and innovation through social media platforms and unique in-store customer events. In the summer of 2011, it brought a rollerskating rink and pop-up shop to New York City to drive traffic to the city's flagship store. Much like Target (NYSE:TGT), Uniglo's strategy involves partnering with on-trend global fashion designers to offer limited edition lines to the mass-market shopper. The retailer launched online shopping to United States consumers in October, just in time for the holiday season.

Mango. Though Mango was established in 1984, this Barcelona-based company is far from reaching its full potential. Brand consultancy firm Interbrand recognized it as one of the top brands in 2012, largely in part to its rebranding efforts, global expansion plans, and adept execution of social media and interactive innovations that engage customers. Earlier this year, the company announced that it would reduce pricing by as much as 20%, but stated that profit margins would not be impacted. In December, it also vowed to eliminate industrial releases of all hazardous chemicals from its supply chain and products by 2020. The brand includes franchise business models, and has aggressively set its sights on Russian and Chinese markets, striving to develop more than 3,000 shops in those regions in the next five years. Domestically, Mango has partnered with JC Penney (NYSE:JCP), allowing it to reach customers beyond its limited United States brick-and-mortar footprint, which includes New York, California, Florida, and Nevada. Mango plans to expand its line to include kids fashions by the end of 2013. Women's Wear Daily reported that the brand's revenue was $11.8 billion in 2011.

Fab.com. This site offers a little bit of everything that design junkies covet---including apparel, art, and furniture---offered at affordable prices. At less than two years old, Fab.com has raised over $150 million in private funding; in 2012 alone, it attracted 8.5 million new users. According to NerdWallet retail analyst Matt Ong, daily sales topped more than $1 million on several days this year. He says that in addition to plans for international expansion (Fab.com recently scored a seven-figure investment from the digital arm of India's largest media company), it's one of the pioneers in the transition from a pure "ecommerce" play into a brick-and-mortar one. "In light of the struggles of major big box retailers, Fab's decision to begin opening brick-and-mortar stores in 2013 demonstrates that the company is operating from a strong position of strength in the industry, and is aggressively looking to expand market share," says Ong. "It has the freedom to build retail stores as technically advanced and innovative as [Fab.com] would like, without having to redo an already existing store. Fab has a long-term vision of the future of design and retail that few other retailers can match."

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